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Sunday, February 7, 2010

Fixing The Economy For Dummies

As we continue to slog our way through the Frank-Dodd economic slump, the worst since Jimmy Carter's stagflation thirty years ago, (and before that, FDR's 1937-38 depression), the only sensible proposals to restore prosperity are coming from Republicans. Wisconsin Rep. Paul Ryan's "Roadmap For America's Future" (link below) details the steps necessary to fix the economy. George Will (also linked below) provides some of the plan's highlights.

Taxes

Two rates: 10 percent on incomes up to $100,000 for joint filers and $50,000 for single filers; 25 percent on higher incomes. There would be no deductions, credits or exclusions, other than the health care tax credit (see below).

[Will isn't entirely correct about the deductions. There is a generous standard deduction totaling $39,000 for a family of four. Will doesn't mention it, probably because it's self-evident, but the AMT would also be abolished].

Ryan would eliminate taxes on interest, capital gains, dividends and death. The corporate income tax, the world's second highest (at 35%), would be replaced by an 8.5 percent business consumption tax.

[This alone would reduce the unemployment rate to below 5%. Corporate money now flushed down the bureaucratic toilet would be used to hire productive workers].

Medicare and Social Security

...preserved for those currently receiving benefits, or becoming eligible in the next 10 years (those 55 and older today). Both programs would be made permanently solvent.

...workers under 55 (would get) the choice of investing more than one-third of their current Social Security taxes in personal retirement accounts similar to the Thrift Savings Plan long available to, and immensely popular with, federal employees. This investment would be inheritable property, guaranteeing that individuals will never lose the ability to dispose every dollar they put into these accounts.

Ryan would raise the retirement age. If, when Congress created Social Security in 1935, it had indexed the retirement age (then 65) to life expectancy, today the age would be in the mid-70s.

Health care

Universal access to affordable health care would be guaranteed by refundable tax credits ($2,300 for individuals, $5,700 for families) for purchasing portable coverage in any state. As persons under 55 became Medicare eligible, they would receive payments averaging $11,000 a year, indexed to inflation and pegged to income, with low-income people receiving more support.Ryan's plan would fund medical savings accounts from which low-income people would pay minor out-of-pocket medical expenses. All Americans, regardless of income, would be allowed to establish MSAs -- tax-preferred accounts for paying such expenses.

What we have instead is Obamanomics - massive government spending rewarding favored constituencies (unions, lawyers, bureaucrats, community organizers, etc.) and failed enterprises (New York, California, AIG, GM, etc.). Such spending is ineffective and unsustainable.In his weekly NRO column, Mark Steyn cites director of the Congressional Budget Office Douglas Elmendorf's testimony to the House Budget Committee, “If literally nothing is done, then eventually something very, very bad happens. But I think the widespread view is that you and your colleagues will take action.” Steyn goes on to write that the likes of Pelosi, Reid, Frank and Obama are highly unlikely to "take action" (i.e. - rein in spending) and "something very, very bad" will happen.

One indication of the misdirection of the country is the employment statistics for the government relative to the private sector. For the former, the recession has been a boom time. And with the federal budget set to skyrocket over the next decade, the near term future (at least until the crash) looks even brighter for federal bureaucrats. That is unless common sense prevails and Paul Ryan-like proposals are enacted. The following statistics (USA Today) cover the period, 12/07-6/09.

When the recession started, the Transportation Department had only one person earning a salary of $170,000 or more. Eighteen months later, 1,690 employees had salaries above $170,000. (!!!! - doing the math, that's a 169,000% increase in 18 months)

Defense Department civilian employees earning $150,000 or more increased from 1,868 in December 2007 to 10,100 in June 2009, the most recent figure available.

Federal employees making salaries of $100,000 or more jumped from 14% to 19% of civil servants during the recession's first 18 months — and that's before overtime pay and bonuses are counted.

Democrats like to direct their "populist" outrage at what they call the "rich" - aka - the successful. The real scandal is the transfer of wealth from the efficient, productive private sector to the wasteful, bloated public sector.